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TENNESSEE GAS TRANSMISSION COMPANY v. STATE NEW YORK (04/29/69)

SUPREME COURT OF NEW YORK, APPELLATE DIVISION, THIRD DEPARTMENT Claim No. 42126 1969.NY.41392 <http://www.versuslaw.com>; 299 N.Y.S.2d 578; 32 A.D.2d 71 April 29, 1969 TENNESSEE GAS TRANSMISSION COMPANY, RESPONDENT,v.STATE OF NEW YORK, APPELLANT Appeal (1) from a judgment entered January 26, 1967 upon a decision of the Court of Claims (Ronald E. Coleman, J.), and (2) from an order entered October 10, 1966, which denied a motion to dismiss the claim. Louis J. Lefkowitz, Attorney-General (Julius L. Sackman, Ruth Kessler Toch, Seymour Martinson and Lawrence J. Logan, of counsel), for appellant. Brennan & Brennan (William R. Brennan of counsel), for respondent. Aulisi, J. Reynolds, J. P., Staley, Jr., Cooke and Greenblott, JJ., concur. Author: Aulisi


Appeal (1) from a judgment entered January 26, 1967 upon a decision of the Court of Claims (Ronald E. Coleman, J.), and (2) from an order entered October 10, 1966, which denied a motion to dismiss the claim.

Aulisi, J. Reynolds, J. P., Staley, Jr., Cooke and Greenblott, JJ., concur.

Author: Aulisi

 This is an appeal from a judgment of the Court of Claims in favor of claimant, entered January 26, 1967, and from an order entered October 10, 1966, which denied a motion to dismiss the claim as untimely filed.

On December 28, 1954, the Federal Power Commission issued a certificate of public convenience and necessity authorizing claimant to extend a natural gas transmission line from its existing facilities in Hebron, Pennsylvania to a point near Greenwich, Connecticut, a distance of some 230 miles. Approximately 16 miles of the proposed line was to be located within the State of New York and a portion thereof was to be constructed within lands owned by Westchester County and the Westchester County Park Commission.

Claimant thereupon began acquiring easements for the construction of the proposed line and with regard to the lands owned by Westchester County and the Westchester County Park Commission, claimant obtained from the Transcontinental Gas Pipe Line Corporation (Transco) the assignment of a pipeline easement granted to Transco by the County and Park Commission in 1951. The consent of both bodies was obtained to the assignment as was their approval to certain boundary modifications of the 1951 line necessitated in part by Public Service Commission regulations. A deed incorporating these modifications and granting claimant a permanent easement for its gas pipeline was executed by the county and the Park Commission on June 10, 1955. The total consideration paid by claimant to Transco, the County and the Park Commission for the easement rights was $1,088,390.55.

Construction was commenced on June 20, 1955, and the pipeline was completed and operational by December, 1955.

Prior to the commencement of construction, claimant was aware that the construction of a new State highway (later to be called the Cross-Westchester Expressway) had been authorized by the Legislature in 1952 (L. 1952, ch. 436) and that a consulting engineer had been retained by the State to plan the route of the new roadway. Claimant, in fact, had obtained a copy of the engineer's so-called "preliminary preliminary" 1954 plans as well as his June, 1955 revision, both of which indicated that the lands of the county and the Park Commission and through which claimant held its easement were being considered.

In the spring of 1956, claimant was furnished a copy of the final plans for the White Plains section of the Expressway and a determination was made that certain sections of claimant's pipeline would interfere with the proposed highway and consequently would have to be relocated. Subsequently, the State began acquiring property for the highway construction, including lands of the county and the Park Commission in and through which claimant held its easement. Claimant insisted that the cost of relocation be paid by the State, and during the negotiations that ensued, the counsel to the Department of Public Works wrote to the Attorney-General and requested a formal opinion "as to whether or not the relocation costs of said pipeline is a reimbursable item to the Tennessee Gas Transmission Company assuming that the company were to do the relocation work". The Attorney-General's opinion advised that: "the damage, to which the utility company is subject by reason of the intended appropriation, is compensable; and that the cost of relocation is a reasonable or convenient formula for determination of the amount of such damage. * * * It is my opinion, therefore, that if, in the exercise of reasonably prudent business judgment, the Superintendent is convinced that the costs of relocation are not in excess of the amount of damages to which the Tennessee Gas Transmission Company would reasonably be entitled to, he may enter into an agreement of adjustment with the company, in which agreement the amount of damages to be received by the company would be limited to reimbursement for the cost of relocating its facilities." (1957 Opns. Atty. Gen. 243.)

On May 8, 1957, the first of the two contracts in issue, relating to the White Plains section of the expressway, was executed. Each of the two contracts consisted of two separate agreements, one entitled "agreement of adjustment", the second "agreement relating to reimbursement for relocating facilities". By the terms of the adjustment agreement, the State agreed to pay to claimant the "actual and necessary" cost of relocating its pipeline and to furnish claimant with appropriate substitute easements, both items as compensation for the appropriation of claimant's easements. In the second agreement, claimant undertook to relocate its pipeline at cost. On July 2, 1958, similar agreements for the Elmsford section of the expressway were entered into.

During the course of the relocation, claimant submitted invoices totaling $1,111,723.13 for the White Plains section, and $892,737.52 for the Elmsford section. The State made periodic payments totaling $950,617.56 and $645,259.33, respectively, leaving a balance due on both agreements of $408,583.76.

On October 5, 1962, claimant received a letter from the Department of Public Works informing it that no further payments would be made on either agreement. Thereafter, on April 3, 1963, the claim herein was filed to recover the balance due under both agreements. The State interposed a counterclaim seeking the return of all prior payments.

The trial court awarded claimant the entire balance due, together with interest, and, as additional relief, directed the State to convey to claimant the promised alternative easements.

First among the multitude of issues raised by the State upon this appeal, and perhaps the most fundamental objection of all, is the challenge to the validity and legality of the agreements sued upon. In essence, the State argues that these agreements constitute illegal gifts of State moneys in contravention of section 8 of article VII of the State Constitution inasmuch as the State is under no obligation to compensate claimant for the cost of relocating its facilities. Cited in support of this contention is the common-law rule that a utility maintaining its facilities in the public streets pursuant to a franchise assumes the risk of their relocation and is bound to relocate those facilities at its own expense when such relocation is required by the public convenience, health or safety (Matter of Consolidated Edison Co. of New York v. Lindsay, 24 N.Y.2d 309; New York Tel. Co. v. City of Binghamton, 18 N.Y.2d 152; New Rochelle Water Co. v. State of New York, 10 N.Y.2d 287; New York City Tunnel Auth. v. Consolidated Edison Co., 295 N. Y. 467; Transit Comm. v. Long Is. R.R. Co., 253 N. Y. 345).

Several important considerations lead us to conclude that the common law is inapplicable to the facts of this case. First of all, underlying the application of that rule is the concept of franchise, a special privilege which authorizes use of the public streets thereby creating a right where none existed before and which commensurately requires that the one to whom the privilege is granted assume the risk of relocation (Transit Comm. v. Long Is. R. R. Co., supra, p. 351). Claimant's right to construct and maintain its gas transmission line was not, however, premised upon a mere franchise or license, rather it was founded upon a valuable property interest, a permanent easement duly acquired at the cost of over $1,000,000 from two municipal corporations authorized by law to so encumber their property (L. 1948, ch. 852, § 492). Nor can the particular property involved here be characterized as a "public street" within the meaning of the common-law rule. At the time the easement was acquired and the pipeline constructed there was neither a public street nor a public highway in the area and we note, in passing, that property acquired and held by the Westchester County Park Commission is deemed generally to be "park" and parkland (see L. 1948, ch. 852, §§ 472, 476; Matter of County of Westchester [ Hutchinson Riv. Parkway ], 246 N. Y. 314). More importantly, to treat these agreements as being merely contracts to pay relocation cost is to lose sight of the context in which these agreements were made and the intent of the parties thereto. It is evident that "reimbursement for relocation costs" was utilized solely and merely as a convenient and appropriate formula and method of payment intended and designed to compensate claimant for the damages it sustained when its easement was appropriated. Thus, in exchange for the taking of claimant's valuable property interest, for which claimant was entitled to just compensation, claimant was compensated and the precise form which that compensation took was the payment of relocation costs, an amount which at that time was estimated would not exceed the total ...


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